Opendoor Technologies Inc. (NASDAQ: OPEN) shares witnessed a stunning surge on Monday, soaring as high as 121%. This rally continues an upward trend from the previous week, driven by an influx of investors, particularly enthusiastic retail traders and social media buzz.
The triple-digit gain propelled the stock price to $4.97, well above the $1 range where it had been languishing for the past few months. While the American online real estate marketplace's stock subsequently pulled back (closing up approximately 43%), it still marked a six-day winning streak, with a cumulative gain of 312%.
"It's like retail investors are partying like it's 1999," said Matt Maley, chief strategist at Miller Tabak + Co. "The action in some of these new 'meme stocks' is looking more and more like what we saw in 1999, and Opendoor’s move is the most extreme."
He noted that this volatility is reminiscent of the GameStop era in 2021 when retail traders congregated on platforms like Reddit to snap up small-cap, volatile stocks.
The UBS "meme stock" basket (tracking US stocks that have gained popularity through online and social media attention) rose 4% on Monday, led by stocks like Beyond, Beyond Meat, and Virgin Galactic Holdings Inc.. Other highly volatile so-called "meme stocks" include QuantumScape (up nearly 200% in the past month) and Bit Mining Ltd. (up 87% over the same period).
The stock gained traction after Eric Jackson, founder of Toronto hedge fund EMJ Capital, encouraged buying Opendoor in a series of posts on platform X. The stock quickly became a popular topic among retail traders on social media. The stock ranked first in trading volume on the Stocktwits platform on Monday afternoon, and it was frequently mentioned on the Reddit forum WallStreetBets.
Trading volume in Opendoor shares reached approximately 1.9 billion shares on Monday, more than 17 times the three-month average. Data compiled by S3 Partners showed that short positions in the stock represented approximately 24% of the float.
The options market was also frenzied. Trading volume in Opendoor stock options exceeded 3.4 million contracts on Monday, more than triple the record set last Friday. About half of these options were expiring on Friday, suggesting investors were betting on short-term volatility. The average trade size of the most active $4.50 call option was just 11 contracts, indicating that most of the trading came from retail investors.
Opendoor trading was temporarily halted due to volatility during the last hour of Monday's trading session. Shortly after 3 p.m. New York time, nearly 26 million Opendoor shares traded in one minute, causing the stock price to plunge by about $1, after which trading was halted. After trading resumed, volume remained high.
"Volatility can bring gains, and it can take gains away," said Kim Forrest, chief investment officer at Bokeh Capital Partners. She added that large "meme stock" rallies will eventually fade. "Every sale is met with a buy, and if there are not enough buys, the price will go down."
Opendoor went public in 2020 through a merger with a special purpose acquisition company (SPAC). After a boom in early 2021, the stock price steadily declined. Prior to this stunning six-day rally, the stock was down 51% this year.
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